Bad news is good news as index makes a gain

New Zealand's benchmark share index rose with US markets, which appeared to be expecting weak job data overnight that could make the Federal Reserve think twice about aggressive rate hikes. The S&P/NZX 50 Index rose 68 points, or 0.6 per cent, to 11,417.34. Turnover was $91 million.

On Thursday, markets reacted negatively to strong US manufacturing data. Yesterday investors reversed the decline after some weak labour market data emerged. “Good news is seen as bad news for the market and bad news is seen as good news for the market,” said BNZ strategist Jason Wong. In essence, bad economic data might dissuade the Fed from pushing through rate hikes which slow the economy and hurt equity valuations. The latest US labour market data release was scheduled for last night, NZ time.

A basket of stocks sensitive to economic growth moved higher yesterday. Vulcan Steel rose 2.7% to $9.70, Fletcher Building rose 2.2% to $5.54, and NZ Oil and Gas was up 2.2% at 47c. Heavyweight stocks boosted the index’s headline gain, with Mainfreight up 2% at $81.55, Auckland International Airport rising 2% to $7.74 and Meridian Energy climbing 1.8% to $4.785.

My Food Bag Group continued to gain ground, up 4.4% at 94c. NZME shares fell 0.8% to $1.28, after large shareholder Osmium Partners said they had sold more than $11m worth of shares in the three months ended May. Equity analysts at Macquarie recently downgraded the entire listed Australian media sector as the risk of an economic slowdown grows.

Sky Network Television shares fell 2.2% to $2.64 and honey maker Comvita declined 0.3% to $3.31, despite takeover rumours still lingering around both stocks.

Pacific Edge fell 2.5% to 79c and Ryman Healthcare dropped 3% to $9.25. Shares in stock market operator NZX declined 1.6% to $1.26 despite a big increase in trading volumes during May. The total value traded across the NZX was $3.87 billion, an increase of 22% from April. The increase was strongest in wholesale trading, which lifted 24%, while retail trading also rose 10%.

This boost in trading was largely driven by Ryman Healthcare falling out of an MSCI Standard Index at the end of May, forcing index trackers to trade out of the stock.

The NZ dollar was trading at 65.55 US cents at 3pm in Wellington, up from 64.72 on Thursday. Investors' willingness to take on risk meant they sold the US dollar and pushed the Aussie and NZ dollars up in comparison. The trade-weighted index was at 72.59, from 72.02 on Thursday.